Debt Relief Options in South Carolina

Debt Relief Programs in South Carolina

Those who are struggling to pay off debt in South Carolina can find programs to help through banks, credit unions, online lenders, and for-profit and nonprofit debt relief companies. These programs include debt management, debt consolidation loans, debt settlement, and bankruptcy.

Here is an overview of each program:

Debt Management Program

Debt management is an effective way to pay off high-interest debts without having to take out a loan. These plans reduce the interest rate you pay to around 8% (sometimes lower) if you qualify. They also provide affordable monthly payments that eliminate credit card debt in 3-5 years.

The counselors at nonprofit credit counseling agencies are certified by the National Foundation of Credit Counseling, and the certification is renewed every two years.

You should note that your credit scores will drop slightly at the start of the program because you will be asked to close out your credit cards, but as long as you make your payments on time and pay off the total amount you owe, your credit score should improve dramatically.

» Where to find it? –  Nonprofit credit card counseling agencies offer debt management and allow you to enroll over the phone with a credit counselor or online. The counselors will assist you in creating an affordable budget that includes payments toward eliminating your debt.

» Is this right for you? – Debt management programs are ideal if you have high-interest credit card debts that you are unable to pay off.  You should remember that any reduced interest rates made by lenders will be void if payments are missed.

Debt Consolidation Loan

Debt consolidation loans allow consumers to pay off multiple high-interest credit card debts with a single, low-interest loan from a bank, credit union, or online lender.

It is necessary to have a good credit score in order to receive good interest rates with debt consolidation loans. A score above 700 is ideal, but you can still get fair rates with a score of 670-699. If you have a score under 670, the rates likely will be too high to be of any advantage.

» Where to find it? –  Banks, credit unions, and online lenders offer this type of debt relief. You should compare lenders to find the best rates.

» Is this right for you? – If you have a credit score above 670 and can stop using credit cards, debt consolidation loans might be the best option.

Debt Settlement

Debt settlement involves consumers, or better yet the settlement company, negotiating with creditors to pay less than what was originally owed. Although this option can sound enticing with promises of large debt reductions, this debt-relief option can hurt more than it can help.

Debt settlement companies advise consumers to halt credit card payments, which can lead to late fees and increased interest payments added to the balance owed. Credit scores are also likely to drop as much as 100 points with this program.

» Where to find it? – Seeking companies that specialize in debt settlement is key when considering this option. These companies can negotiate on your behalf with creditors to agree on a reduced sum.

» Is this right for you? – If you can no longer make regular payments toward your credit card debt and feel like the only other option is bankruptcy, debt settlement may be a better choice. You should remember that there are many negatives associated with debt settlement and creditors have no obligation to agree to reduce your debt.

Nonprofit Debt Settlement

Nonprofit debt settlement is similar to for-profit debt settlement – the goal is for the consumer to pay less debt than what is owed – but there is one major difference: there is no negotiating.

Nonprofit debt settlement allows consumers to eliminate credit card debt by paying less than what was owed – typically 40%-50% less – over 36 months. With this form of debt relief, there is a 0% interest rate on the debt over the three-year repayment period.

You should consider that qualifying for nonprofit debt settlement can be difficult and that you must make on-time payments without missing any for 36 months, or the program is canceled.

» Where to find it? – This form of debt settlement is still new, and only available at a few nonprofit credit agencies. Those who wish to find companies should search online using the phrase “nonprofit debt settlement.”

» Is this right for you? – Nonprofit debt settlement is ideal for consumers who are in default status, which means no payment on their credit for 180 days.

Bankruptcy

Although bankruptcy may seem enticing with the promise of a “do-over”, it should be a last resort choice for struggling consumers since it has the most negative impact of any debt-relief option.

There are two types of personal bankruptcy: Chapter 7 and Chapter 13.

To qualify for Chapter 7 bankruptcy, a consumer must pass a “means test” that requires their income to be less than the median income for their state. In South Carolina, the median income is $28,569.

If you don’t pass the means test, you could file for Chapter 13 bankruptcy.

In Chapter 13 bankruptcy, you will have a preapproved repayment plan that allows you to keep your assets in exchange for making regular on-time payments to lower your debt. The plan will typically last 3-5 years and any unsecured debts like credit cards will be discharged at the end.

You should note that there are severe consequences to filing for bankruptcy. Credit scores drop 100-200 points and filing for bankruptcy is also a negative on your credit report for 7-10 years, making it difficult to get a loan.

» Where to file? – Before filing at a federal bankruptcy court, consumers are encouraged to consult with an attorney due to the complex nature of bankruptcy laws.

» Is this right for you? – If you feel that you have exhausted all of your other options and cannot pay off your debt in five years, bankruptcy may be the only option.

Statute of Limitations in South Carolina

The statute of limitations is the time a creditor or debt collector has to file a lawsuit against a consumer for unpaid debts. If the collection agency does not file within the time frame, the consumer can no longer be sued for that specific debt.

In South Carolina, the statute of limitations for most types of consumer and business debt is three years.

Residents of South Carolina have several rights when it comes to paying off debt and it is important to understand each one to avoid being taken advantage of by debt collectors. If a creditor files a lawsuit, consumers need to know how to respond and defend themselves appropriately.

Debt Collection Laws in South Carolina

Debt collection agencies often use high-pressure tactics like threats of garnishments to intimidate the consumer into paying the debt. Although the U.S. has laws to protect consumers from debt collectors, some states have their own laws to further protect residents.

Residents of South Carolina fall under the Federal Debt Collections Protection Act, which prohibits collection agencies from harassing borrowers or using unfair or misleading tactics to collect debts.

Misleading or unfair tactics include falsely implying that they are attorneys or government officials; misrepresenting the amount of your debt; indicating that the forms they are sending you are legal forms when they are not; or implying that forms that are being sent to you are not legal documents when they are.

Debt collectors may not state that you will be arrested if you do not pay off your debt, or that they will seize, garnish, attach, or sell your property or wages unless the collection agency or creditor intends to do so, and it is legal to do so (garnishment is currently prohibited in South Carolina for the collection of most debts).

Debt Statistics in South Carolina

• Consumer debt: The average consumer debt in South Carolina is $84,536, over $10,000 less than the national average.
• Mortgage debt: South Carolina residents have an average mortgage debt of $179,329 ranking them 33rd in the nation.
• Student loan debt: South Carolina is ranked ninth highest in the nation for student debt with the average borrower having a balance of $38,414.
• Credit card debt: The average credit card debt in South Carolina is $8,221, more than $1,000 over the national average.
• Auto loan debt: The average resident has $5,420 in auto loan debt, ranking them #20 in the U.S.
• Average credit score: Residents of South Carolina have an average FICO score of 678, the 10th lowest score in the nation.
• Identity theft: In the past year there were 17,642 cases of identity theft in South Carolina, the 18th highest in the U.S.
• Foreclosures and bankruptcies: South Carolina had 3,376 bankruptcies filed last year, over 1,000 fewer cases than the year before.